Category Archives: Mallorca Property Blog

We understand Palma town council is close to banning holiday rentals in apartment blocks.

Long term rentals will not be affected, nor detached or semi-detached dwellings and always when a specific tourist rental licence is granted.

The Gobern Balear, will also empower other local authorities across the islands to prohibit apartment rentals if considered necessary.

The legislation has come about via an unlikely alliance between the left and right wing parties as a result of skyrocketing long term rents, overcrowding and a strain on local infrastructure.

There has also been opposition from the hoteliers, who see holiday rentals as unregulated and unfair competition. Similarly, block residents have been complaining about the general poor behaviour of holidaymakers.

We understand the exact details of the new law have yet to approved, including the prosecution process.

Other measures being studied include a limitation on the number of holiday rental properties an individual may exploit.

long term property rental prices have soared in the last 12 months with an average increase of 6% pa.

What impact has Brexit had on British demand for property in Spain in the five months since the referendum? The latest official figures show a substantial fall in British purchases, and a survey I recently carried out suggests a big overall drop in British buyer activity, especially in the top two destinations of the Costa del Sol and Costa Blanca.

The latest official figures from the Spanish Association of Land Registrars shows that British home purchases inscribed in the Land Registry fell by 16% (yoy) in the third quarter, the first decline in years (see chart below). The Brexit effect is clear, and I expect the Q4 figures to be even worse.

To get a better idea of the impact in the five months since the British voted to leave the EU I’ve carried out a survey of property professionals in different parts of Spain including estate agents, buying agents, lawyers, mortgage brokers and surveyors, working in Barcelona, the Costa Brava, Costa Blanca, Valencia, Costa del Sol, and the Balearics, answering questions about the market between July and October. I got 22 responses back in October and November answering questions on British buyer interest, sales, budgets, concerns, and vendor behaviour.

Despite variations between regions and price segments, the overall picture was one of a big decline in British buyer interest in the months leading up to, and just after the referendum. However, there are also some signs that British buyer interest might now have stabilised at a lower level, helped by a bit of a recovery in the pound, though it is still too early to tell.

The following table summarise the impact of Brexit on British demand in the first few months after the referendum in most of the foreign buyer destinations in Spain, based on the experience of the professionals surveyed. The results are subject to individual bias but the overall picture is clear.

AREA

BRITISH MARKET INITIAL REACTION

OVERALL IMPACT

All Spain

Initial spike in enquiries then 30% fall

Big decline

Costa Brava

Initial spike then big fall in some cases

No change to big decline

Barcelona

20% increase

Moderate increase

Costa Blanca / Valencian

Declines of up to 80%, typically 50% to 60% down

Big decline

Murcia

Slight increase in enquiries

No change

Costa del Sol

Declines of up to 80%, but typically 20% to 30% down

Moderate to big decline

Balearics

Declines of up to 35%

Moderate to big decline

Other market observations that came out of the survey were as follows:

Agents reported agreed sales falling through in every region as a result of Brexit, but in areas like Barcelona buyers from other nationalities stepped in quickly to take the place of British clients who backed out of sales.

In almost all cases the main reasons given for the decline in British buyers were 1) the decline in the pound and 2) the uncertainty generated by Brexit. That said, the weaker pound was the main reason. Had the pound gone up after Brexit, is it is likely that British demand would also have gone up.

Many Britons have put their plans to buy a home on Spain on hold for the time being, but those who have not are now looking with lower budgets in Euro. It seems budgets have been hit hardest in the middle market, whilst some professionals working in upper market segments of the of the Costa del Sol, Balearics, and Catalonia, reported no change or even a slight increase in the Euro budgets of British clients. This could be because wealthy clients have more diversified sources of finance available to them.

In most areas the Brexit effect was limited to the British market, but some professionals also reported noticing a spill over into other markets, as buyers from other nationalities decided to adopt a wait and see approach, or try and take advantage of the situation to make lower offers.

British vendors are now more flexible on price in most areas, so buyers have an opportunity to negotiate a better price with British vendors, all thanks to Brexit.

I have also noticed that some Spanish property companies have decided to drastically scale back or even stop marketing in the UK, which is just another reflection of the Brexit impact.

How much will British demand shrink? It all depends on where the pound goes from here, but I’m bracing myself for a 50% decline or more if the pound doesn’t recover. How do I get that figure? Look at where sales were the last time the pound was this weak, as illustrated by the following chart.

Even if British demand falls 50% it would still be the biggest national segment in the foreign market. But a decline of that magnitude would certainly be felt by the rest of the market, putting pressure on vendors and prices in middle market areas of the Costa Blanca and Costa del Sol.

Will British demand ever return to the level it reached at the end of 2015, when it was still a long way below the boom-time level? I imagine so because Brexit has not changed fundamental preferences, just circumstances. But who know how long it will take. As one agent on the Costa del Sol said to me “you can forget about the British market for at least a year.”

Thanks to the following professionals for their help with this survey:

As Mallorca based Chartered Surveyors for over 20 years, Property Works has a unique insight into what purchasers should be looking for when buying a home in Mallorca. We also get to understand their needs, even if they do not recognise each and every one themselves. Our approach is holistic (not just an economic one) considering lifestyle, leisure, work, family and health.

So why do we consider this unique town as the best place to set up home/invest in a country location in Mallorca?

Here’s a guide to why…

10. Variety really is the spice of life

Sóller’s (pronounced soy-yer) maze of medieval streets and alleys hides an impressive array of properties from modern port apartments and villas to old town houses, factory conversions and traditional country estates.

The majority of construction is traditional and natural, especially outside the urban centres with the use of stone facades, curved terracotta tiled roofs and timber doors and shutters. This gives the place a certain aesthetic harmony which has been complimented with relatively strict planning controls.

Typical Solleric constructions…

Unusually for the island, many of the town houses have three storeys, unlike any other town centres on the island where two are more common.

Our experience of working in the construction industry monitoring quality, materials, methods, timings and prices gives Sóller’s constructors a big “thumbs up”. The work carried out is often not cheap so be sure to get various quotes and be clear on the time schedule for delivery.

Fortunately it is still possible to find projects in Sóller, especially in the old town where many large family homes can be purchased for renovation at a relatively reasonable price per meter square. Many retain original features such as beautiful curved open staircases with intricate ironwork and marble panelled walls, carved woodwork and stone, crystal skylights and ancient fired floor tiles.

Art Nouveau and Modernist influences in the architecture are everywhere. The port offers both traditional and contemporary properties. Mountain retreats are also an option.

Sóller can give you the Mediterranean diet with excellent locally sourced, market produce and restaurants. Its specialist products include:

Prawns, fish and other shellfish. Gambas de Soller are famous for their colour, texture and flavour.

Citrus fruits – More than 600 years ago Arab sailors brought citrus trees to Mallorca and converted Soller into an orange valley, often known as the “golden valley”. Thanks to the abundance and quality of the mountain water as well as the abundant sunshine, Soller now produces over 120,000 oranges a year.

Olives – The Mallorquin olive (now recognized as a protected product) is known for is intense green colour, saltiness and aromas. Oli de Mallorca has multiple culinary uses, its exquisite taste and its health benefits let enjoy a high quality and tasty food. As a basic part of the Mediterranean diet, the Majorcan Olive Oil has vitamins and unsaturated fatty acids. It is a pure olive juice, produced without chemical processes, becoming a high quality aliment.

Almonds – The Mediterranean climate and the dry farming crop system gives the Mallorcan almond its unique characteristics. Its sweet taste, a greater content of proteins, fatty acids and carbohydrates, make this a universally desired product, used in a great variety of foods.

Wine – TheMallorcan wine industry currently boasts 70 different wineries, some of which are highly recognised nationally and internationally.

Sóller is situated right in the middle of the Tramuntana mountain range, a region awarded World heritage status by UNESCO as an area of great physical and cultural significance.

It is a range running the entire length of the island with the highest peak, Puig Major, at 1445m. To put that in perspective, Ben Nevis, Britain’s highest mountain is “only” 1219m from sea level.

Views of mountain terracing and the reservoirs at Escorca

What makes this mountains so special are their size and shape, being 90km in length and 15km at its widest point taking up about a 1/4 of the whole Mallorcan territory. Its narrowness and height means the mountains fall dramatically into the sea and on the plains.

The area is an absolute dream location for walkers, cyclists, beach and nature lovers.

Cala Deia and Tuent – about 15 minutes by boat from Sóller.

7. Airports don’t have to be terrible

Mallorca’s airport, Sant Joan, is the third largest in Spain and carried over 23 million people in 2014. Over 100 airline companies use the airport and flights to most cities in Europe are covered. The island enjoys good winter flights schedule, unlike many other smaller Spanish airports which often require connecting flights. In fact, Mallorca is increasingly becoming a “commuter destination” and gives many people the opportunity to work in Mallorca allowing for extended stays. Ibiza, Menorca & Barcelona are all about a 45 minutes flight away from Palma. One can reach the airport in about 35 minutes from Sóller.

6. Palma or Ciudad/Ciutat

A panel of judges for the Sunday Times supplement recently chose Palma de Mallorca as their overall favourite out of fifty top worldwide places to live. It was described as a destination that “has it all”.

Palma is reached in just 25 minutes, most of the journey though attractive rural countryside. There is also a train and a regular bus service.

Nuff said.

5. Sóller – not one town, but two (or even three)

Evidence of early settlers has been found in Soller dating back to talayotic times. (2,700-5,200 BC) in the “La Muleta” area. Soller’s development is likely to have evolved over the years due to its great natural resources and the enterprise of its people, trading (oranges/olives/fabric) with Barcelona, Valencia, and France. It is still possible to see wonderful turn-of-the-century factories (in various states of repair!) through the town.

Soller has two distinctive, but complementary centres. The port and the town are some 5km apart connected by tram or road. They offer completely different ambiences.

The port is an almost perfect circled bay with a relatively small opening to the open seas. It enjoys a pedestrian walkway, sandy beaches and a small marina. Although some development has occurred (there are a few medium sized hotels), the area is relatively low density and unspoilt and retains its fishing village feel. A lot of investment, both private and public, has occurred in the area with the new port-town tunnel and the complete renovation of the port front. Private investment includes the creation of the Jumeirah resort, a five star hotel perched on hill often described as the best hotel in Europe. The port has many excellent shops, bars and restaurants, great walks and usually a place to keep your boat.

The Port of Sóller and swimming off the coast

Buying or renting a small boat and exploring the coastline by sea is a must. True Mediterranean seas still, crystal clear seas and miles of unspoilt coastline are there for the taking.

Beyond the port, Soller is an expanse of land known as the “valley” due to its position between the surrounding mountains. It is an exceptionally green and fertile place with mainly almond, orange and olive groves filling the valley.

The town centre has a mainly medieval feel but marked by its extraordinary modernist architecture. Examples of this are the Gran Hotel, Can Prunera, the church and the banco Santander buildings. It has a thriving artisan market and a wonderful square.

The Gran Hotel The Church

The third area is Biniaraix, possibly the most picturesque and unspoilt hamlet on the island. It sits on the outskirts of Soller at the foothills of the Barranc, an ancient mountain footpath leading to the mountain reservoirs in Escorca. For administrative purposes, it is actually run by both Soller and Fornalutx. The houses in the village are entirely stone build and most streets are cobbled and pedestrian.

Biniaraix

4. Work & lifestyle balance

Suffice it to say it pretty likely to be a lot better that back in the UK.

3. Education and health

The world health organization ranked the Spanish health system as being the 7th best in the world, with France coming first and the UK in 18th position. Two new public hospitals have been built in Palma in the last 10 years, Son Llatzer and Son Espases, offering some of the most modern facilities in Europe to the Mallorquin residents and guests.

Complementing the new public centres, Mallorca´s private healthcare has also been reinforced with improvements at hospitals such as at Clínicas Palmaplanas, Policlinica and Juaneda, all located in Palma and usually accepting international cover by groups such as Bupa and Axa.

On our last count Soller has at least 8 schools, educating kids from 3-18 (not counting nurseries). For international schools there are at least 8 more in Palma and beyond offering baccalaureate, primary, and O/A level study.

2. The People

The Sollerics are a warm and friendly bunch, just learn some Catalan and Some Spanish and you will always be welcomed.

Sóller and its surroundings have been attracting artists, musicians, sports & nature lovers, young families, actors, entrepreneurs and retirees in its droves for years. When hunting for a home, it pays in every way to follow the cool crowd, either to the city, the suburbs or the countryside.

It now has a very multicultural society, attracting amongst others, British, French, German and Scandinavian Europeans. There are also large South American and African communities. One must also add the “forasters”, the non-Sóller born residents from other parts of Mallorca or the mainland. This foreign contingent offers a richness to the society which has, overall, integrated well within the Sólleric community and contributed to make this such as special place.

1. The Economy, stupid

Enough with the doom and gloom about homeownership in Spain.

Things are looking bright again for Spain…..

The exchange rate between the UK pound and the Euro is now at its best level since 2008 offering an extremely attractive €1.38 to the pound. So at todays rate, a €1m property would cost about £725,000.

With around 2.8 million legal foreign residents in Spain, not to speak of ever-increasing tourism figures, Spain has become a top destination for foreign property investment. The Spanish Ministry of Tourism predicts that more than one million foreigners will set up home in Spain in the next six years, and this figure is expected to treble by 2025.

Interest rates also remains extremely low at under 0.2% meaning borrowing has never been cheaper. Quantitive easing by the European central bank means over 100 billion Euros is coming to Spain. A big chunk of this this will be made available for banks to lend.

Soller has relatively low unemployment in the national context.

A large flourishing rental market is offered in Spain and investment in a property with good rental potential can achieve excellent returns. Spain is a top choice for tourists who enjoy a variety of self-catering accommodation, apartments and private villas. Get it right, and you could rent your property out for six months of the year to cover costs and have it for your own use, free of charge, for the rest of the year.

From an economic point of view, It is always good to follow infrastructure investment in and that is what has happened in Sóller A prime example of the town´s transformation is the centre, with its main square and main shopping street or Carrer de la Lluna, which has changed spectacularly over the past ten years. This area is now almost fully pedestrianized and has filled up with welcoming terraces, boutique shops, and a lovely food market. It is now a must-visit for the thousands of tourists who are lengthening the island’s season from the beginning of March to November.

According to Kyero, the average price for property in Soller is at 468,000€, almost double the national average. Prices have remained resilient during the crisis, mainly due to limited stock and an increase in demand. It is not cheap by Spanish standards, but it appears that historically, capital growth has occurred and will continue to do so.

Nationally, market conditions are improving with prices up 1.8% and 2.4% increase in sales. Construction spending is also up 34% in Mallorca alone in 2014.

According to the Sunday Times, Palma is the best city to live in the world 2015. Below is an extract from the article.

“Our winner is Palma. We believe it has everything” said the newspaper. Although not explaining the exact criteria when making its choice, it does highlight some of the elements that make Ciutat de Mallorca attractive to the British, including the climate, the beauty of the old town , gastronomy and beaches.

“It ‘s a pocket-sized city that has it all on a beautiful island ”

Another argument is that the city is easily accessed for a Brit who wants to live abroad. The short distances across the island are a plus to living in Mallorca emphasising that Palma is a ten minute drive from the airport and throughout the year there are cheap flights.

Apart from Palma , Sunday includes three other Spanish cities in their top 50: Barcelona ; Ojén north of Marbella, and Zahara on the coast of Cadiz.

In the list of the 50 best cities to live in, the Mallorquin capital has also been located ahead of destinations such as Berlin , Honolulu, Miami , Rome, Florence , Paris, Vienna , Stockholm , Copenhagen , Rio de Janeiro and Sydney.

After 6 consecutive years of decline, the property prices in the Balearics closed 2014 with a 0.7% rise, according to the National Institute of Statistics.

The rise is less that the national average (1.8%), but one has to consider that the average price of property has not fallen as much as the rest of Spain throughout the economic crisis.

In real terms, when looking at achieved sales prices for used properties, a 100,000€ property purchased in 2008 would cost 61,558€ today. A new property bought in 2007 would be sold today for a price in the region of 79,643€ (according to the National Institute of Statistics).

Home sales recorded during last March in the islands show an increase of 71% over the same period of 2013, a percentage no other Spanish region comes even remotely close to, since Catalonia, in second place, increased by 42.8%, and the national average is 22.8 %, according to data provided by the National Statistics Institute (INE).
The presidents of the associations of promoters and real estate agents, Mr José Luis Guillén and Mr José Mir respectively, interviewed today in the Diario de Mallorca, agree that this reactivation is based on two main factors: the good performance of the economy and labour market in the archipelago (thanks to an excellent tourist season), and the fact that it is becoming easier for buyers to access a mortgage.
This is reflected in the mortgage plans currently offered by some banks, with interest rates of Euribor plus 1.99 points. However, the conditions under which a mortgage is now offered are not as flexible as ten years ago. At present, banks’ valuations are much more adjusted to real market value and banks will finance up to 80% of this value, so that the buyer will have to come up with the remaining 20 % and about 10% on top to cover the operation costs.
On the other hand, Mr José Luis Guillen expressed his regret that finance is much harder to access for developers, although the stock of new homes is nearly exhausted in the islands, especially in some municipalities, such as Palma.
This revival of purchases and the shortage of new housing is having an effect on property prices, which are again recording increases of around 3%.
One year ago, Solvia, created by Banco Sabadell to sell its huge property stock, was selling with an average discount of 52% on the original prices. Now, at Sabadell-Solvia they have reduced their discounts. “We had a 52% discount and now only do 40%. The funny thing is that we are now selling more than last year. We think it’s the end of falling prices, except for the worst properties.”
Their analysis agrees with studies such as the last from the Instituto de Prácticas Empresariales (IPE), which showed that Balearics is among the three Spanish regions with a lower number of unsold homes, with a total of 7,965. It is also the first region in which prices have started to rise consistently. A new market scenario appears to be clearly opening.

Is it finally safe to talk about a new property market cycle in Spain?

The Spanish property market has suffered a deep adjustment since its peak in 2007, but signs of recovery are appearing with increasing frequency all around. Until now, only the most optimistic experts -or those with vested interests- have been talking of a turnaround. But it finally feels fairly safe to say that the worst is over and that a new expansive cycle is beginning.
The most recent data of property transactions and other data such as building activity cannot be seen as anything but good, after such as long period of bad news. The monthly statistic elaborated by notaries compiling property transactions (arguably the most trustworthy reflection of the market) has shown significant rises in recent months, with respect to the same month last year: in January, sales were up by 62.3%, in February, by 39.8%. At the same time, house prices were up by 9.4% and 0.6%, and mortgages by 58% and 35.9%. Simultaneously, the building sector has seen an increase of 23.9% – well above the European average of 5.5% , only surpassed by Slovenia (33.1 %) and Hungary (28.3 %) and light years ahead of Italy, bringing up the rear with -7.9 %.
According to El Pais newspaper, the notaries have interpreted these increases as a clear sign of a market recovery. It appears that investors now believe that the adjustment in prices has run its course, and banks are slowly starting to lend again. Other positive economic data are the decrease in unemployment figures, the growth in the number of tourists, and the general improvement of the Spanish economy.
However, it may well be the case that instead of the fast-paced price increases of past decades we now enter a period of slow growth or even stabilization of the market.